The magnitude and Cyclical Behavior of Financial Market Frictions



Figure 9

Model-Implied External Finance Premium

75th Percentile

50th Percentile

25th Percentile

Note. Percentiles are weighted by real sales. The counterfactual excercise with a
constant
μ = 0.12 uses the firm-specific variance and productivity threshold obtained
from estimating a time-varying
μ.

28



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